21 Sep The Productivity Mega Deduction: What it Means for Your Business

The Productivity Mega Deduction: What the New Immediate Expensing Rules Mean for Your Business

On September 15, 2026, the federal government announced the Productivity Mega Deduction, a proposed change that would now let businesses immediately expense a much wider range of capital purchases in full in the year purchased.

What is “immediate expensing”

Normally, when a business buys equipment or other depreciable property, it can’t deduct the full cost right away. Instead, the cost is written off gradually over several years through capital cost allowance (“CCA”), using rates set out for each class of property.

With immediate expensing, Instead of spreading the deduction out over years, a business can deduct the entire cost of an eligible asset in the year it is acquired and put into use. That means a much bigger tax deduction up front.

Building on what already existed

Budget 2025 previously introduced the Productivity Super-Deduction, which already allowed immediate expensing for a specific set of assets, things like manufacturing and processing equipment, clean energy equipment, zero-emission vehicles, patents, computers, and data network infrastructure.

The Productivity Mega Deduction would extend immediate expensing to a much broader range of property, including heavier commercial vehicles, research and development spending, fibre-optic cable, mining property, oil and gas pipelines, software, aircraft, rail track, bridges, and roads. And unlike the original measure, this deduction is proposed to be permanent.

What’s still excluded

The expansion is broad, but it isn’t universal. Most buildings are carved out of the new rules, including manufacturing and processing buildings, which will continue to be covered under the existing Budget 2025 rules rather than the new ones. A handful of other categories are also excluded, including certain intangible assets like franchises, licenses, and goodwill, and regulated natural gas pipelines. Property that doesn’t qualify for immediate expensing under the new rules will still get the benefit of the existing Accelerated Investment Incentive, which provides an enhanced, though not full, first-year deduction.

Standard company cars and light trucks generally fall under CCA classes 10 and 10.1, and certain vehicles in those classes remain excluded from the new rules, regardless of whether they are gas-powered or electric. Zero-emission vehicles are already covered under separate CCA classes and were eligible for immediate expensing under the original Budget 2025 measure, so that treatment has not changed. The Mega Deduction primarily expands coverage to heavier commercial vehicles outside classes 10 and 10.1, such as freight trucks, trailers, buses used in a business, aircraft, and rail equipment.

The timing that matters

The proposed rules would apply to eligible property acquired on or after September 15, 2026.

What to do now

This is still a proposal though it was released with draft legislation. Some details could shift before the legislation is enacted. That said, the direction is clear enough to factor into your planning today.

This article is for general information only and reflects proposed legislation that has not yet been enacted, so details may change. If you’re planning a capital investment and want to understand how these rules could affect your business, reach out to your advisor at Clearline.